Rachael was joined by fellow director and payroll expert Chris Harrison, and together the couple set out to cut through the red tape to help listeners avoid costly mistakes, unexpected payroll headaches, and those dreaded compliance letters from HMRC.
“If you’ve ever asked, “Do I really have to pay for that?” or “Can I reclaim this from HMRC?” began Rachael, “grab a notebook, because we’re breaking down the Big Five types of statutory pay, the most common traps employers fall into, and how to get it right without losing your mind - or your money.”
As Chris warned: “Statutory pay is a crucial aspect of payroll compliance in the UK, yet it is often overlooked or misunderstood by both employers and employees. Whether you run a small business or are part of a larger organisation, understanding your legal obligations - and entitlements - is essential.”
If some of the nuances can be difficult to comprehend, defining it is fairly straightforward, added Chris. “Statutory pay refers to the minimum payments set by law that employers must provide to eligible employees during specific periods away from work, such as illness, maternity, paternity or adoption leave.”
The five primary types, Chris went on to explain, each with own criteria and calculation methods but some common pitfalls, are:
- Statutory Sick Pay (SSP), which provides eligible employees with £116.75 per week for up to 28 weeks.
- Statutory Maternity Pay (SMP), which provides support to employees taking time off to have a baby, and consists of 90% of the employee’s average weekly earnings for the first six weeks, followed by £187.18 per week (or 90% of earnings if lower) for the next 33 weeks.
- Statutory Paternity Pay (SPP) offers up to two weeks’ pay at £187.18 per week for eligible fathers or partners. Though this represents a significant income drop for many, it is a right that should not be overlooked.
- Shared Parental Pay (SHPP) allows parents to share both the leave and the pay associated with having a child, and mirrors the rates of SMP and SPP after the initial six weeks.
- Statutory Adoption Pay (SAP) functions in much the same way as SMP but applies to adoptive parents, and recognises the equal importance of support during adoption, following the same rate and duration as maternity leave.
“One of the most common mistakes employers make is assuming that annual leave does not accrue during statutory leave,” Rachael warned. “Other frequent errors include misclassifying workers (e.g., treating employees as contractors), failing to conduct proper eligibility checks, inadequate record-keeping, and overlooking the opportunity to reclaim eligible statutory payments. These mistakes can lead to HMRC penalties, employee grievances and unexpected payroll costs.”
“To manage statutory pay effectively,” advised Chris, “we’d strongly recommended that businesses invest in HMRC-compliant payroll software that automates calculations and ensures compliance with current legislation. And maintaining thorough documentation - including fit notes, correspondence with employees, payroll records and relevant forms - is essential. In addition, employers should monitor the latest HMRC updates, which are often communicated via free online webinars and bulletins.”
And to sum up?
“When uncertainty arises,” said Rachael, “consulting with your accountant or payroll professional is the most reliable way to ensure compliance and avoid costly errors. The complexity of payroll regulations should not be underestimated. But with the right systems and support in place, it is entirely manageable.”
